Niamh O’Donoghue gets professional financial advice on debt, saving, investing, and talking about money…
I have always been ‘good’ with money – that is, I was taught the importance of saving from an early age (£2 a week in the credit union). While my efforts and commitment proved fruitful for my emergency rainy day fund, they proved less so for my anxiety.
I can’t pinpoint the time precisely, but I developed a somewhat unhealthy relationship with saving to the point of being fearful about spending the money I had worked hard to earn.
Perhaps I could blame my parents – a hardworking generation who lived through three economic downturns and suffered severe deprivation and unemployment as a result. Or maybe it’s my generations fault – millennials – because we (apparently) don’t understand the value of money or hard labour and instead choose to spend our earnings frivolously on avocado toast and boujee iced coffee.
I always wanted to be prepared for the worst (unemployment, homelessness) so saving became such an aggressive and competitive part of my financial ‘wellbeing’ that I almost forgot to live in the meantime. But that was then (teens, early twenties) and this is now (much, much closer to thirty). I have learned, above all, there is no one way to be ‘good’ at money.
Saving is, of course, the gold standard of good money hygiene, but in the grand scheme of all things economic, I am learning that there are better and more efficient ways to make my money work harder for me. The pandemic afforded me – and no doubt some of you, too – a great opportunity to adopt a new, positive monetary mindset and, for the first time, I could take a step back and better understand my finances (hint: there’s more to banking than saving!). At the beginning of 2021 I made a commitment to take better control of my finances which included meeting with various brokers (Zoom, of course), experts and reading lots of books, articles and Twitter threads.
The more I learn the more I wish I had done this sooner, but there’s no time like the present to make small but impactful and long-lasting changes to my finances. While buying a house or a car isn’t everything, having a thorough grasp of my spending habits is certainly a good place to start, and is something that can be relevant to you too – regardless of your age, career, financial wellbeing or financial goals, as you’ll find out below.
Always Seek Professional Help
“How are you supposed to know about these things unless you engage with someone whose job it is to help you?” says Carol Brick, Managing Director of HerMoney.ie, a dedicated financial advisory service to professional women all over Ireland.
Seeking professional help might seem like a daunting – and expensive – task, but Carol, who has more than two decades of experience working in the financial sector, believes it’s the most efficient way to get a broad, unbiased overview of your financial health. “Engage with a professional, independent financial advisor first,” she says, drawing a likeness between self-evaluating your balance sheet and self-diagnosing a medical problem (hint: both cause unnecessary anxiety and almost always end badly).
“It’s a financial advisor’s job to examine your individual circumstances, your expectations, your personal objectives, your income, your data for everything, and then they’ll design a plan around that. It’s well worth it and it’s the only way to move forward, in my opinion.”
A stumbling block that deters people (including me) from accessing professional advice is the perceived cost. From my experience, taking a leap and contacting a professional financial service can be daunting, but you’ll quickly learn (especially from independent clinics, in my opinion) that you’re in their best interests. In many situations, like HerMoney, a consultation is free and costs only occur if you agree to a plan. If you choose to proceed with them on an on-going basis, costs are usually commission based and vary between 3 and 10%. O’Leary’s Financial Planning and Financial Planner also offers free consultations and is a good way to both gauge where you sit and also to experience speaking to a financial expert for the first time.
Other financial planning businesses like Keenan Financial Planning offer full financial services for €500, a fee which includes a Zoom consultation, a full analysis of your financial protection, savings, investments, retirement planning and health insurance, a risk analysis and a comprehensive personalised plan. On the higher end of the scale is Fonz Scanlan of Moneysmart.ie, who will provide a comprehensive plan which covers cashflow, savings, investments, property, mortgages, pensions, insurance and tax for a fee of €2,000. Similarly, Prosperous Financial Planning – run by revered financial expert Eoin McGee – offer a ‘stepping stone’ service at a cost of €1,500 for those who don’t need a full financial plan but who perhaps are interested in getting up and running with their pensions/investments/protection. Ask Paul, another independent financial advisor, has a backlog of free educational videos covering everything from budgeting and money management to tackling debt that are akin to a mini consultation (and are perfect if you hate phone calls).
It’s Healthy To Talk About Money
Historically, women are less inclined to talk about money. For many, financial trauma stems from deep-rooted personal experiences which can be difficult to unpack. At some point though, you’re going to have to have a conversation about money — with a spouse, a roommate, your children, your aging parents — but did anyone ever teach you how to talk about money? You’re likely to answer ‘no’.
Carl Richards, a financial planner and creator of The New York Times Sketch Guy column has spent the last decade speaking all over the world about money. What he found is that, for all our cultural differences, one thing we seem to have in common is that we were taught to never talk about money. He perceives two schools of thought for this; that it’s simply impolite to talk about money in the company of others, and, secondly, that money is too emotional. Because of this, Richards likens our first conversations about money as akin to “running into an electric fence that we didn’t know was electric”.
It’s shocking, to say the least.
His straightforward solution to talking about money? “Just start. That’s it. Just. Start,” he writes in his essay for The New York Times on talking about money. It’s something Carol promotes, too: “Communication is key. The longer you keep it to yourself, and the longer you keep it buttoned up, the worse it’s gonna get,” she chimes in, acknowledging how difficult it can be to talk about personal debt but adds that there is always a solution to every problem. “Your life partner, your sister, your parents… they’re going to be on your side.”
My parents and grandparents passed on some sage financial advice that has really helped me to maximise my money, for which I am grateful. When the time comes for me to share my wisdom with the small people in my life, however, there are things I would like to do differently.
For example, I’d like to encourage more open conversation about money and the gender pay gap to help shape informed decisions and healthy debate. I’d like to have more confidence in the terminology around money and finance, I’d like to know how investing works, and I’d like to be less anxious overall. When the time comes to teach your offspring the value of money, “it is never too early to encourage good money habits” says Bank of Ireland, whose research shows that children as young as age 3 can develop an awareness of money and, by age 7, develop money habits for life.
Their free educational hub (which takes the form of a cute owl called Ollie) covers practical topics like: understanding where money comes from (fun fact: euro notes are made from cotton, who knew); planning; spending; running out of money and budgeting. Most articles and websites will cite basic budgeting and pocket money as a good place to start with children. So, for example if you give Sally €5 per week and she wants a new book, sweets and a doll, she needs to decide what from her selection she can afford and what she needs to save for. A lot of the advice on the internet and from the experts is wholly practical.
Credit Card Debt Can Destroy Your Future
Pandemic or not, the wealth of the Irish actually reached a new high in 2020, according to the Central Bank, as we saved more and cut down on debt. However, Ireland currently ranks as the fifth highest in the EU for personal credit card debt, which is fuelled by frivolous spending and spiraling debt. “I hate to paint everyone with the same brush,” Carol says of Ireland’s sour reputation, “But we do have a reputation for frivolous spending [and] we still cannot differentiate between a need and a want in this country, unfortunately.”
Facing up to your debt, Carol says, is the best way to tackle it, noting that a major (and obvious) red flag for debt is spending more than you’re earning: “You should only be spending out of your savings [account] and not spending out of a credit card.” Before committing to a credit card, consider this: if you fall behind on payments, debt can spiral out of control quickly. Begin by considering what you want to use the credit card for and whether you will be paying off what you owe every month or spreading repayments over a period.
Saving Small Amounts Often
When I first moved to London, I was hyper-aware of the cost of everything. Very quickly you find yourself spending close to £40 a week on Pret coffee and croissants. I made a conscious effort not to overindulge in the caffeine department and instead made use of my Keep Cup. I also rounded up the cost of coffees/drinks/lunch and put the additional few pence into my Revolut account (more on this below) and I tried my best to save an extra £20 a week where I could.
The truth is, for many, setting aside money each month is often harder than it sounds. The reality is often that once rent or mortgage repayments are deducted, followed by bills, childcare, health insurance, groceries, car costs, vet bills – and whatever else might pop up in a given month – there’s not a lot left to save.
Establishing good saving habits (or improving your existing ones) means imposing some rules, including changing the language we use around money. If you’re guilty of using the “I’m bad with money” line, then it’s time to flip your thinking. Just like Sarah Porretta, director of strategy and insight at the Money and Pensions Service, says, “It’s not about great maths, iron will or financial know-how,” but rather “it’s about making saving easy, automatic and meaningful.” Interestingly, it has been HerMoney’s busiest year ever for savings and investments, which is undoubtedly a reflection of the changing landscape around financial health and wellbeing.
Leaning into technology, Carol notes, is a great way to funnel excess monies (even really small amounts) into impactful saving. “Money Lover is ideal for budgeting and managing cash flow and tracking your spending,” Carol says, adding that the app “really allows you to keep 100% transparency on the ins and outs.” Other apps like Tandem link to your bank account and analyse your spending, and others, like Revolut, will also put your spare change into a virtual savings jar.
Other apps (and even some banks) offer price ‘roundups’ now which is where if you spend €2.50 on a cup of coffee, it’ll round it up to €3 and put the €0.50 difference into your savings account. Added up over a few card transactions each day, it can amount to a few hundreds of euros over the year, giving you a great start on savings.
It’s Never Too Early To Start A Pension
There are certain pieces of advice that are worth hearing over and over again: always wear SPF; change your bed sheets regularly; you can always try again next time. This is especially true when it comes to personal finance – particularly a pension.
Perhaps you’re in on the first rung of the career ladder and opted out of joining the company pension because you thought it was too soon, or maybe you’re somewhere in the middle and beginning to panic that you started too late. Whatever your situation, there is always a logical solution – even if that means tightening your purse strings further. What’s more, pension savings offer huge tax relief, as Carol explains: “The main thing to know is that there’s tax relief available on pensions and a lot of people are unaware of how generous tax relief is. If you’re on the low rate of tax, you get 20% back on your contributions up to a certain level. If you’re paying higher rates of tax, you get 40% back, so that return that you get immediately is the same as investing in one of those big, really, really good portfolios, over 10 years, maybe or over five years.”
The first place to start a pension is with your employer, who usually match your contributions. If you are self employed then you should consider starting a personal pension. This is when you make a monthly payment into a plan, and then opt for what your pension fund will invest in. These will be presented to you as a selection of choices when you opt to get a pension, and will include a mixture of assets, like houses, shares, and cash.
Starting your pension in your twenties is not the be-all and end-all of pension funds and Carol points out that even if you start saving for a pension at 55, “you still have a whole 10 to 15 years of funding” ahead of you.
Investing Is Not Out Of Reach – Especially Women
As difficult as it might be to imagine investing when you are struggling with debt or have a salary that doesn’t stretch far, you can invest wisely with as little as €50 a month.
What is investing?
Investing is when you choose to put your money into bonds, commodities or cryptocurrencies with the goal of receiving a profit down the line. It should be noted that you shouldn’t invest until your serious debts are resolved (and long-term debt repayments are under control). Why is investing important? Not only is it a way to make your income work harder for you and your future financial health, but if more women opted to invest their money it could make an enormous difference in reducing the gender investment gap. Men are roughly twice as likely as women to invest and women can often feel intimidated by investing because it’s simply not talked about enough.
Investing is all about calculated risk and how much you’re willing to put aside and for how long. Here, Carol briefly explains the on-boarding process: “Firstly, we measure [your] attitude to risk. So if you decide to invest with us we’ll send you a risk questionnaire. On the risk questionnaire you’ll answer things like, if you invested €10K yesterday, and you logged on and that was worth €6K today, how would you feel now? If the person says they’re very upset then obviously that person cannot take on much risk. So we are able to gauge where you sit on the risk scale.”
“The risk scale is 1 to 7. If you come out with 4 or upwards, then that’s medium risk. And then the closer to seven is obviously high risk. A medium risk portfolio should be very diversified and show consistently positively performing shares.”
HerMoney deals primarily with blue chip companies who have very strong balance sheets, good cash flows (Apple, SAP, Kerry Group), but what about what about Bitcoin, Ethereum, Crypto Kitties and the oh-so now world of NFTs? Firstly it should be pointed out that these are largely unregulated, high-risk and volatile (remember when Bitcoin hit six figures before Christmas?). So while they’re the talk of the investing town at the moment, it’s wise to seek professional advice before throwing your savings at them.